Sep

20th

How to increase prices by 17% without losing sales

If you made it along to BrightonSEO on Friday 13 September you may have attended my presentation about “increasing prices without losing sales”. If not, I’ve translated it into this article to help those of you who are dubious about asking for more from your prospects.

A few years ago, when I first became managing director at Wordtracker we were running some conversion optimisation tests on the site. We were trying to increase the number of trials we were getting to Wordtracker’s software.

Because we were smart, we were testing the sign-up form; we know that the bottom of the marketing funnel is a great place to start testing. Because we were smart, we were running a quick A/B test that we knew would get us quick results. Because we were smart, we’d designed a sign-up form that was really easy to fill out. And because we were really dumb we released the new version of the page with the wrong price – $69 instead of $59.

After a day or so, we realised our mistake, but we let the test continue. And to our surprise, the page with the higher price generated most conversions. This is why I argue that it’s possible to increase prices by 17% without losing sales.

My mistake suggests that testing can produce surprising results. Testing can increase your conversion rates – which is crucial in today’s digital environment, where competition is tougher than ever.

We have a problem

I believe there’s a problem – a big problem – in today’s online market: it’s this: the cost of acquiring customers is increasing.

Here’s how PPC costs increased over a five year period. They doubled.

In SEO, there’s a similar problem. More companies are investing in SEO and competition is becoming tougher. I’m sure you’ve experienced that.

Also the internet is becoming less open. Companies like Facebook and Apple are creating a closed shop, where they control the entry.

There’s an additional problem we all face: acquiring customers is increasingly difficult. Most businesses don’t sell to about 98% of their site’s visitors. Our marketing is incredibly ineffective. Most ecommerce sites will have conversion rates of just a few percent. And this problem is not new.

Yet, this problem has been around for many years – since before the internet was invented and well into the last century. I believe that previous generations of marketers can provide us with insights into what we should be testing on our websites today.

This guy is Claude Hopkins:

He was a pioneer of the advertising industry. In 1924, he released a book called ‘Scientific Advertising’ – and that book contains all the clues we need to test our web pages and improve conversions.

If you didn’t already know about his book, it has taught generations of marketers about selling – what we now call direct marketing.

This is Hopkin’s hypothesis.

“The severest test of an advertising man is in selling goods by mail.”

Hopkins was fascinated by direct mail marketing, because it’s a medium where costs and results are crucial to success. Where there’s a very thin line between profit and failure and where marketers test, test, test their offers.

In the 1920s sewing machines were an expensive item; they were the Macbook Pro of their day. Yet sales were slo and in the post-war environment, cutting prices wasn’t an option.

So, Hopkins suggested to his client that they should try different offers if it was to remain in business.

And one was a resounding success.

The old approach had been to aim for a sale right away. Hopkins suggested changing the offer so that customers were allowed a week’s free trial of the machine. It would be delivered to your door along with a man to show you how to operate it.

“Let us help you for a week without cost or obligation” said the ad.

The offer was almost irresistible. Many more people were happy to commit to a trial than make an outright purchase and yet 9 out of 10 trials led to a sale.

A simple change of offer – better service – had led to a large increase in sales.

Yet, over the past several years, as businesses have moved online, too many of those direct marketing lessons have been lost. Too often, we try to compete on price, when that’s just one of the factors that differentiates us from our competitors.

Testing the marketing funnel

In this model of our sales funnel – we can see loads of prospects arriving at your site. Usually only a small proportion of those visitors go on to convert: whether that’s buying a product, signing up to a newsletter, or whatever you want them to do.

“An ad writer, to have a chance at success, must gain full information on his subject.” argues Hopkins. In other words we want to know why large portions of your audience aren’t converting when they arrive at your site.

To find out, you’re going to need to eat your own dog food and by that I mean: buy one of your own products.

Using screen recording software, such as Screenflow, it’s possible to record every step in your sales path, looking for usability and conversion problems at each step. If you haven’t bought one of your own products recently, I guarantee you’ll find usability problems along the way.

You can also watch your customers buying – or not buying – your product using software such as ClickTale. Here you see a screenshot from a ClickTale video. You can see what the visitor enters on the form, where he clicks, and how far he gets. Every movement of the mouse, every keystroke is recorded.

Wathcing recordings of individual visitors is time-consuming work (an agency like ours can help take on some of the work, if that’s helpful), but it gives you a detailed picture of why people aren’t buying and what’s stopping them.

Another way of getting to know your audience is to ask them. As you probably know, SurveyMonkey is a cost-effective way of sending questionnaires. You should aim to get responses from visitors who DON’T buy from you.

According to Hopkins, “Many of the ablest men in advertising are graduate salesmen”. Book some time with your best salesperson and find out what your customers’ most common objections are – and how they overcome them. This will be invaluable information. On your sales pages, make sure you address each of these objections individually.

What should you test?

So, there are thousands of variations of tests we could run. But, again we want to prioritize, so that we get big wins quickly.

There are always thousands of possible changes you could make to a site. So, we need to prioritize our work. With a better understanding of your audience, you’ll be able to idenfity the big, quick wins – changes that have the potential to make a big difference to conversion rates and are easily tested.

One of the online retailers that does online conversion best is Amazon. Let’s look at LoveFilm, which is owned by Amazon, and see if we can get some ideas of what works well, and what we might test.

This is the UK home page for LoveFilm.

It’s pretty obvious that the aim of the page is to get us to take a free trial.

One of the themes of Hopkins’ book is that not a single pixel on the page should be wasted. Here everything supports the sales message and the call to action.

Hopkins talks about the need for writing to be “brief, clear and convincing”. He argues that the style of the language should be clear, short, and simple and it’s possible to get the key messages even if you skim read because there are clear sub-headings.

These three bullet points – No late fees, No long term contracts, cancel any time – are crucial because they reduce risk and emphasise service.

In direct mailings you might test thousands of different headlines for a single product. The headline was the key to the ad’s success. You’ll notice that the headline here highlights the fact that Lovefilm also offers television. It’s worth testing your headline, to see if you can find the text that will bring more conversions.

In the days of direct response ads, images were crucial. They generate attention. But, of course, they take up space, which has to be paid for. So advertisers would test different images to see which converted best, while using the least space. I’m sure that LoveFilm has tested different images. And, clearly, Downton Abbey, with it’s portrayal of early twentieth century England, has the greatest appeal.

To make sure you’re not wasting space, you can test your pages with Google’s Browser Size tool. Or I prefer this bookmark tool that you can use in Chrome: bit.ly/responsive-bookmark

Let’s move on to LoveFilm’s pricing page, where we’ll see more examples of good conversion technique:

There’s lots of content on this page, but again, barely a pixel is wasted.

As you can see there are six subscription options. If I were to ask you which one LoveFilm wants you to pick, the answer’s pretty obvious.

It’s highlighted as being Most Popular. On this page, LoveFilm tries to help you make a choice. It uses violators on the page to highlight its preferred option. A violator is simply a graphical interruption to the structure of the page. You can see how ‘Most Popular’ breaks into the grid. Lower down the page, the £9.99 box also violates the structure – it’s a different colour, there’s a large check or tick, and an orange border – all help to highlight the ‘Have it all’ plan.

It’s certainly worth testing violators on your pages, to highlight a key selling point or call to action.

Again, on this page LoveFilm are keen for us to take up the free trial offer, so it gets mentioned four times in the first few lines.

Yet my view is that there are too many choices on this page. Often, when you offer visitors a choice, your conversions will fall. Uncertainty reduces response. The page has too many choices. There are six different subscription options:

And we know what happens when you offer too many choices – conversion rates fall. So, in our marketing funnel, this is likely to be a problem page.

It’s worth noticing how Netflix, a competitor, has just one subscription option on its home page. This makes sign-up simpler.

As you can see, there are fewer options. The design is simpler.

As Hopkins says: “The offer should be so clear and simple that an idiot can understand it”.

Changing business models

I’d love to test a single subscription price on the LoveFilm page. That might mean we have to change and test the whole business model. But, of course, in most of our industries, change is happening so rapidly that we’ll get the best results from testing BIG changes.

Our aim, when we’re testing, should be “to get to know and understand the customer so well the product or service fits him and sells itself… ” (Peter Drucker).

Those of you working with catalogue companies will know that they used direct marketing techniques intensively but, their whole business model has shifted. We know, for example, that in Christmas 2012, 40% of Argos’ sales came from mobile.

Similarly, B2B markets are shifting. Law firms used to hate marketing themselves. But now that non-lawyers are allowed to own firms, the model’s changing. There’s a premium on good quality leads: and we’ve done some great work with a law firm recently in setting up tracking so that we now know where every single enquiry comes from – email or telephone call, down to the keyword level. We can tell not just the quantity of leads – but also the quality of the enquiries.

Which means that digital marketing has finally caught up with the tactics that direct marketers were using back in 1924!

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Justin is Managing Director at Receptional.com and was previously chief executive officer (CEO) at Wordtracker.com.
With 20 years marketing experience, Justin has worked with a variety of the UK’s leading brands. These include the Ramblers, the UK Foreign Office, Paddy Power, Ladbrokes, the National Farmers Union, Ernst & Young, and many others.
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